In the News

Santa Cruz council to mull water rate hike
Five-year plan would increase rates 61 percent

By J.M. Brown, Santa Cruz Sentinel, 7/21/14

SANTA CRUZ — The Santa Cruz City Council on Tuesday will hear a plan to increase sharply water rates and create a drought-recovery fee for funding infrastructure projects, stabilizing revenue and boosting reserves.

Water Director Rosemary Menard proposes hiking rates — both the ready-to-serve and separate consumption charge — 10 percent in October and 10 percent each July for the next four years. The increases represent a total hike of 61 percent through 2019 for customers living inside and outside the city.

For the typical single-family account, the drought-recovery fee would increase the ready-to-serve charge — the basic monthly charge for service — by an additional 42 percent this year and 14 percent next year. The fee, designed to recover lost revenue brought on by mandated conservation, would expire in June 2016. It will not be tied to actual water use, as some have called for, because of the variability of consumption.

The entire package of rate and fee increases is estimated to help the utility, which serves 94,000 customers, cover capital improvements, repay future debt, establish a three-month reserve and separate emergency reserve fund and rebuild a fund designed to minimize future rate increases. The hike also will generate more revenue from the utility users tax of 8.25 percent assessed on each monthly charge, which goes directly into the city's coffers.

"The overall goal of the proposed financial policies and rate adjustments is to allow the water utility to establish and sustain a strong financial position over the next several years," Menard said in a council report. "Accomplishing this goal will allow the department to more effectively plan for and manage rate increases and access financial markets on the most favorable terms."

The city Water Commission approved the plan July 7 and the council will consider setting a public hearing Sept. 23.

Menard said a number of problems point to the need to raise money.

One, during the rate increases from 2004-2009, new revenue missed projections by 17 percent because the council postponed the final year's increase until 2011 and per-capita water consumption fell 27 percent during that period despite projections that demand would stay constant.

Two, the department has drained its once healthy fund balance of $39 million in 2011 to $12 million this year to pay for capital projects, including the Bay Street Reservoir replacement, North Coast transmission main and seawater desalination study. Menard said the city needs to generate revenue to continue work on the North Coast, upgrade the Graham Hill Water Treatment Plan and make various other fixes — the cost of which is higher than earlier projections because two credit agencies downgraded the department after a recent refinancing of old debt.

Finally, Menard said it's prudent to establish new reserves totaling $8 million and rebuild the customer rate stabilization fund at $2.3 million.

Jeanne Belknap, a 30-year resident of Clearview Court Mobile Home Park, said the proposed rate increases should be halved and an exemption offered to fellow low-income people and seniors. She said her average water use is less than half of the goal requested by the city during the drought.

"I feel like I'm doing and have always done as much as I can short of having a shower once a week, which wouldn't be very popular with my neighbors, and I feel like I'm being penalized," she said.

"We ought to be rewarded in some way, not penalized."

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